Appeals court issues mixed decision on Oak Run covenants

Published: Friday, April 19, 2013 at 6:30 a.m.

Last Modified: Thursday, April 18, 2013 at 5:15 p.m.

An appellate court has determined that the developer of the Oak Run subdivision wrongfully changed covenants related to the collection of amenities fees, possibly to keep money saved from not paying for some of the services, and also failed to comply with state laws about publicly reporting how such fees are spent.

But the same court also has ruled out requiring Oak Run Associates Ltd., the development company controlled by the Ghumman family, to restore the previous language of the restrictions and to reimburse homeowners for charges they had claimed were not utilized for the stated purpose.

The ruling by a three-judge panel of the 5th District Court of Appeal was unanimous, but it split a lower court's initial decision, leaving room for both sides to push the case to the state's highest court.

Lawyers for both sides said on Thursday they were not sure whether to ask the 5th DCA to reconsider the case, which would be a first step before considering going to the Florida Supreme Court.

Such a request must be filed by Monday.

At this point, however, the lawyer for the homeowners believes her clients have prevailed on a major issue that has bothered many residents for years.

"I'm very happy because I consider it a real win, not just for my clients but for other residents in other developments," said Carol Anderson, a lawyer from The Villages who represents the owners of 23 homes inside Oak Run — a State Road 200 community of some 25 individual neighborhoods containing more than 3,400 homes.

On the other hand, Pat Fulford, an Altamonte Springs lawyer who represented Oak Run, maintained that his clients have fulfilled their obligations to the thousands of residents inside Oak Run, and he suggested that only the small minority who instigated the legal wrangling was dissatisfied.

At issue was the disposal of leftover funds from the homeowners' annual dues per a 2005 amendment the developer unilaterally made to the covenants.

According to court records, the homeowners sued in May 2010, asserting that the developer had changed the governing documents in order to shirk responsibility for providing some services and to "pocket" any fees for doing so.

The annual fees paid by the homeowners helped maintain the community's common and recreational areas, and they also went toward providing services for such as trash collection, security, cable television, an internal closed-circuit TV channel and road maintenance.

The fees, court documents say, "may" also allow for building up a "reasonable" reserve to cover future maintenance.

In May 2005, the language pertaining to those services and the reserve account was altered at the developer's sole discretion.

The change eradicated references to the services provided and the reserve account, replacing them with terms that said the charges covered "those services" provided by the developer.

More importantly, as the plaintiffs saw it, the new language said the developer was "entitled" to retain any "excess amounts" left over once the expenses were funded.

The homeowners, calling the new provision unreasonable and, according to court records, arguing that it was invalid because it "substantially changed the character of the development."

The homeowners demanded through the lawsuit that Oak Run Associates be barred from enforcing that provision, alleged that the company had not complied with a state law mandating regular reports on how the association fees were spent, and sought a refund of their fees — as well as damages from Kulbir Ghumman, the developer of Oak Run, personally.

Last year Circuit Judge Jack Singbush rejected all of the homeowners' claims, prompting them to file an appeal.

On April 5, the appellate court upheld part of Singbush's decision and overturned him on others.

In a nine-page opinion authored by Judge Bruce Jacobus and supported by judges Jacqueline Griffin and Vincent Torpy, the court ruled that Oak Run Associates was within its rights to change the covenants on its own — a power recognized by Florida courts for more than 30 years.

The appellate judges, as Singbush did, also dismissed claims for reimbursement of the fees or damages directly from Ghumman.

Yet it is in the details of the changes that the appellate judges found cause for concern, said Anderson, the homeowners' lawyer.

The court held that Oak Run Associate's changes did not "result in material changes to the character of the development."

Still, the judges added, the new language "impermissibly changes the burdens between the parties."

That occurred, Anderson said, when the developer, as the revised provision stated, sought to retain the fees that were charged for the utility services — electricity, water, telephone and gas — for the common areas.

"Although the developer did not attempt to shift these burdens to any other person or entity," the opinion states, "it is not reasonable for the developer to collect fees intended to cover these obligations, while eliminating its duty to apply the funds towards these same obligations and enacting an amendment that allows them to pocket any excess funds."

Such a move, the judges decided, was an "improper exercise of the developer's amendment power."

Anderson conceded that Oak Run Associates — as its lawyer maintained — had spelled out how it would handle the other services such as security and cable TV that had been covered in the main covenants but then dealt with individually after the amendment.

Here, the appellate judges determined that Oak Run Associates was on solid legal ground because the remaining amendments did not change the character of the community, nor the obligations of either side.

The court also noted that the homeowners had not been billed more after the changes.

"Oak Run has never not provided those services and never intended to not provide those services," said Fulford, Oak Run Associates' lawyer, in an interview.

He also noted that the developer had retained ownership of those common areas and was entitled to revenues to cover the maintenance costs.

On the other key point for the homeowners, Anderson said it was just as critical that the appellate court overturned Judge Singbush on the requirement to publicly post a financial report on the amenities fees within 60 days of the end of the community's fiscal year.

In doing so, the court rejected Fulford's argument that law did not apply.

Fulford noted in the interview that the covenants of most homes inside Oak Run were agreed to long before the Legislature enacted the reporting requirement.

He said the state and federal constitutions both protected people from being bound by laws retroactively, and that his client's ability to retain confidentiality of its financial records should not be infringed after the fact.

While the decision might not force developers to be more specific about how the residents' money is spent, Anderson countered, at least they have to be posted and that will reverberate elsewhere.

"This applies to a lot of developments," she said. "And I know, because I've already heard from them."

<p>An appellate court has determined that the developer of the Oak Run subdivision wrongfully changed covenants related to the collection of amenities fees, possibly to keep money saved from not paying for some of the services, and also failed to comply with state laws about publicly reporting how such fees are spent.</p><p>But the same court also has ruled out requiring Oak Run Associates Ltd., the development company controlled by the Ghumman family, to restore the previous language of the restrictions and to reimburse homeowners for charges they had claimed were not utilized for the stated purpose.</p><p>The ruling by a three-judge panel of the 5th District Court of Appeal was unanimous, but it split a lower court's initial decision, leaving room for both sides to push the case to the state's highest court.</p><p>Lawyers for both sides said on Thursday they were not sure whether to ask the 5th DCA to reconsider the case, which would be a first step before considering going to the Florida Supreme Court.</p><p>Such a request must be filed by Monday.</p><p>At this point, however, the lawyer for the homeowners believes her clients have prevailed on a major issue that has bothered many residents for years.</p><p>"I'm very happy because I consider it a real win, not just for my clients but for other residents in other developments," said Carol Anderson, a lawyer from The Villages who represents the owners of 23 homes inside Oak Run — a State Road 200 community of some 25 individual neighborhoods containing more than 3,400 homes.</p><p>On the other hand, Pat Fulford, an Altamonte Springs lawyer who represented Oak Run, maintained that his clients have fulfilled their obligations to the thousands of residents inside Oak Run, and he suggested that only the small minority who instigated the legal wrangling was dissatisfied.</p><p>At issue was the disposal of leftover funds from the homeowners' annual dues per a 2005 amendment the developer unilaterally made to the covenants.</p><p>According to court records, the homeowners sued in May 2010, asserting that the developer had changed the governing documents in order to shirk responsibility for providing some services and to "pocket" any fees for doing so.</p><p>The annual fees paid by the homeowners helped maintain the community's common and recreational areas, and they also went toward providing services for such as trash collection, security, cable television, an internal closed-circuit TV channel and road maintenance.</p><p>The fees, court documents say, "may" also allow for building up a "reasonable" reserve to cover future maintenance.</p><p>In May 2005, the language pertaining to those services and the reserve account was altered at the developer's sole discretion.</p><p>The change eradicated references to the services provided and the reserve account, replacing them with terms that said the charges covered "those services" provided by the developer.</p><p>More importantly, as the plaintiffs saw it, the new language said the developer was "entitled" to retain any "excess amounts" left over once the expenses were funded.</p><p>The homeowners, calling the new provision unreasonable and, according to court records, arguing that it was invalid because it "substantially changed the character of the development."</p><p>The homeowners demanded through the lawsuit that Oak Run Associates be barred from enforcing that provision, alleged that the company had not complied with a state law mandating regular reports on how the association fees were spent, and sought a refund of their fees — as well as damages from Kulbir Ghumman, the developer of Oak Run, personally.</p><p>Last year Circuit Judge Jack Singbush rejected all of the homeowners' claims, prompting them to file an appeal.</p><p>On April 5, the appellate court upheld part of Singbush's decision and overturned him on others.</p><p>In a nine-page opinion authored by Judge Bruce Jacobus and supported by judges Jacqueline Griffin and Vincent Torpy, the court ruled that Oak Run Associates was within its rights to change the covenants on its own — a power recognized by Florida courts for more than 30 years.</p><p>The appellate judges, as Singbush did, also dismissed claims for reimbursement of the fees or damages directly from Ghumman.</p><p>Yet it is in the details of the changes that the appellate judges found cause for concern, said Anderson, the homeowners' lawyer.</p><p>The court held that Oak Run Associate's changes did not "result in material changes to the character of the development."</p><p>Still, the judges added, the new language "impermissibly changes the burdens between the parties."</p><p>That occurred, Anderson said, when the developer, as the revised provision stated, sought to retain the fees that were charged for the utility services — electricity, water, telephone and gas — for the common areas.</p><p>"Although the developer did not attempt to shift these burdens to any other person or entity," the opinion states, "it is not reasonable for the developer to collect fees intended to cover these obligations, while eliminating its duty to apply the funds towards these same obligations and enacting an amendment that allows them to pocket any excess funds."</p><p>Such a move, the judges decided, was an "improper exercise of the developer's amendment power."</p><p>Anderson conceded that Oak Run Associates — as its lawyer maintained — had spelled out how it would handle the other services such as security and cable TV that had been covered in the main covenants but then dealt with individually after the amendment.</p><p>Here, the appellate judges determined that Oak Run Associates was on solid legal ground because the remaining amendments did not change the character of the community, nor the obligations of either side.</p><p>The court also noted that the homeowners had not been billed more after the changes.</p><p>"Oak Run has never not provided those services and never intended to not provide those services," said Fulford, Oak Run Associates' lawyer, in an interview.</p><p>He also noted that the developer had retained ownership of those common areas and was entitled to revenues to cover the maintenance costs.</p><p>On the other key point for the homeowners, Anderson said it was just as critical that the appellate court overturned Judge Singbush on the requirement to publicly post a financial report on the amenities fees within 60 days of the end of the community's fiscal year.</p><p>In doing so, the court rejected Fulford's argument that law did not apply.</p><p>Fulford noted in the interview that the covenants of most homes inside Oak Run were agreed to long before the Legislature enacted the reporting requirement.</p><p>He said the state and federal constitutions both protected people from being bound by laws retroactively, and that his client's ability to retain confidentiality of its financial records should not be infringed after the fact.</p><p>While the decision might not force developers to be more specific about how the residents' money is spent, Anderson countered, at least they have to be posted and that will reverberate elsewhere.</p><p>"This applies to a lot of developments," she said. "And I know, because I've already heard from them."</p><p><i>Contact Bill Thompson at 867-4117 or at bill.thompson@starbanner.com</i></p>